Introduction

Interest in nuclear power is increasing as the world's demand grows for cheap, reliable electricity, along with the need to reduce air pollution. Nonproliferation of weapons and the safe disposal of spent nuclear fuel dominate the nuclear power debate, while nuclear fuel supplies have garnered little attention. Russia and Europe are poised to enter the U.S. commercial market, sparking concerns about the U.S. enrichment industry. Meanwhile, international efforts to expand use of a nuclear-fuel bank in lieu of domestic production continue in an attempt to quell proliferation fears while allowing expansion of civilian nuclear power. Though uranium mining is making a comeback after a two-decade slump, obstacles such as infrastructure problems, stable access to enrichment services, and environmental concerns still dog the industry.

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Discerning Supply and Demand

Close to five million tons of naturally occurring uranium is known to be recoverable. Australia leads with more than one million tons (about 24 percent of the world's known supply), followed by Kazakhstan, with over 800,000 tons or 17 percent of known supplies. Canada's supplies are slightly less than 10 percent of the world's total, while the United States and South Africa have about 7 percent each.

Still, the overall amount of uranium is less important that the grade of uranium ore, according to a 2006 background paper (PDF) by the German research organization Energy Watch Group. The less uranium in the ore, the higher the overall processing costs will be for the amount obtained. The group contends that worldwide rankings mean little, then, when one considers that only Canada has a significant amount of ore above 1 percent--up to about 20 percent of the country's total reserves. In Australia, on the other hand, some 90 percent of uranium has a grade of less than 0.06 percent. Much of Kazakhstan's ore is less than 0.1 percent.

The world uses 67,000 tons of mined uranium a year. At current usage, this is equal to about seventy years of supply. The World Nuclear Association says demand is projected to grow by 33 percent in the next decade to correspond with a 27 percent projected growth in nuclear reactor capacity. However, more efficient nuclear reactors, such as "fast-reactor" technology, could extend those supplies by more than two thousand years. Experts say spent fuel can be reprocessed for use in reactors but currently is less economical than new fuel. Currently, there are nearly one thousand commercial, research, and ship reactors worldwide; more than fifty are under construction, and 130 are in planning stages.

Market Forces

The uranium market declined significantly through the 1980s and 1990s because of the end of the Cold War arms race as well as a cessation in construction of new nuclear plants. Disarmament of nuclear-weapons stockpiles added surplus weapons-grade uranium to the market, which led to a price drop as low as $7 a pound. Much of the fuel currently powering U.S. reactors, for instance, was originally intended for warheads atop Soviet ballistic missiles.

"The United States is dependent on Russia for a significant portion of [its] nuclear energy. I don't think a lot of Americans know that." --Robert Ebel, Center for Strategic and International Studies

According to a Brinkley mining report (PDF), by 2000 the uranium industry had made no significant uranium discoveries in a decade and only supplied about half of global demand. A series of events--including reductions in available weapons-grade uranium, a fire at Australia's Olympic Dam mine, significant flooding in Canada's Cigar Lake mine, and the need for fuel at power plants that extended their licenses--caused significant increases in uranium prices in the last few years. In 2007, prices went as high as $138 a pound but have since hovered in the $40 to $60 range partly because of increases in supply. Analysts say the uranium market also can be difficult to predict because many transactions are not public.

Some experts worry that the lagging uranium industry, in need of more manpower and infrastructure upgrades, will cause delays in the expansion of nuclear power. "Just as large numbers of new reactors are being planned, we are only starting to emerge from twenty years of underinvestment in the production capacity for the nuclear fuel to operate them," says Thomas Neff, a nuclear energy expert at MIT's Center for International Studies.

Uranium Mining

More than half the world's uranium-mining production comes from Australia, Kazakhstan, and Canada. In December 2009, Kazakhstan announced it had pulled ahead of Australia to become the largest uranium producer in the world. Although Australia has the largest supply (PDF), access had been constrained by a 1982 law that limited uranium mining in the country, which was only lifted in last two years. Recent increases in uranium demand have sparked debate in Australia, pitting the mining industry and nuclear advocates against environmentalists and activists for indigenous land rights. Other impediments to increases in mining in Australia and elsewhere include the need for infrastructure, environmental concerns, and a lack of experienced workers.

Because of the upswing in uranium prices, some places are seeing a mining boom despite these obstacles. The United States has experienced steep rises in mining claims even though almost all of the nation's identified reserves are of a quality that puts it on the more expensive end of process costs. Going forward, more global exploration to locate uranium--especially ore lower in cost to recover--is expected as long as market prices remain high. Some U.S. miners have expressed concern about how the market might be affected by uranium released from stockpiles held in various forms by the U.S. Energy Department. But Energy Department officials assure that the agency would not be a source of market instability.

There are also unconventional sources of uranium, such as phosphate deposits and sea water, which currently are not economical to extract, says the World Nuclear Association

Megatons to Megawatts

Surplus highly enriched uranium (HEU), left over at the end of the Cold War, led the United States and Russia to a 1993 agreement--known as Megatons to Megawatts--to turn their weapons-grade material from warheads into nuclear fuel for use in commercial reactors through 2013. Under the agreement, five hundred tons of Russian HEU, equal to about twenty thousand nuclear warheads, was to be "down blended" in Russia with feedstock uranium or low-enriched uranium into about fifteen thousand tons of nuclear fuel that would be shipped to U.S. utilities through the United States Enrichment Corporation (USEC), a nongovernment entity.

As of December 2009, about 382 tons of HEU, equal to about fifteen thousand warheads, has been turned into about eleven thousand tons of fuel, for which the Russian government received more than $8 billion. According to the World Nuclear Association, the military materials supply about 50 percent of U.S. reactor fuel or 13 percent of the world's total fuel requirements. "The United States is dependent on Russia for a significant portion of [its] nuclear energy. I don't think a lot of Americans know that," said Robert E. Ebel, a nuclear analyst at the Center for Strategic and International Studies.

Enrichment Services

Many countries, such as Japan, have enrichment capacity, but it is often less than their overall fuel needs. They rely on fuel imports to make up the difference. The United States, Britain, France, Germany, the Netherlands, and Russia provide enrichment services for commercial export.

Nuclear experts including the International Atomic Energy Agency (IAEA), the UN's nuclear watchdog, have called for an international enrichment bank designed to prevent countries from losing access to enriched fuel and deter them from building their own enrichment facilities. Then-IAEA Director General Mohamed ElBaradei said in 2006 that such a bank would "make sure that every country that is a bona fide user of nuclear energy, and that is fulfilling its nonproliferation obligations, is getting fuel." In November 2009, the IAEA signed a deal with Russia to stockpile 120 tons of nuclear fuel to be available to IAEA-member states. The organization is expected to make a similar agreement with Kazakhstan in 2010 (BBC) for an additional sixty tons of fuel. Russia, the United States, and France also offered to accept shipments of uranium from Iran for enrichment under a stalled UN plan (Fars) aimed at slowing the country's controversial enrichment activities.

"Just as large numbers of new reactors are being planned, we are only starting to emerge from 20 years of underinvestment in the production capacity for the nuclear fuel to operate them," -- Thomas Neff, MIT

Several firms in the United States are considering constructing more efficient enrichment facilities. Nuclear material experts say Russia's enrichment capacity, which is four to five times current U.S. capacity, could deter investment in U.S. enrichment. Russia, having rejected renewing the Megatons to Megawatts deal, has already signed several contracts directly with U.S. utilities for the first time--worth about $3 billion--and is expected to lock up another $1 billion in contracts in 2010. Meanwhile, France's Areva and Europe's Urenco along with General Electric, Louisiana Electric Services, and USEC are in various stages of planning for construction or expansion of enrichment facilities in the United States.

The USEC alone is unable to handle all U.S. demand, and uses gaseous diffusion, an older, less-efficient enrichment technology. Utilities pay a fee based on how much energy is used, which corresponds to how thorough the process is and how much enriched uranium is gained from feedstock. Companies that provide enrichment using more efficient technologies, such the gas-centrifuge technology employed by Russia's Tenex, can obtain more fuel for less energy, making these companies potentially cheaper alternatives to USEC. Henry D. Sokolski, executive director of the Nonproliferation Policy Education Center, questioned whether the heavily government-subsidized USEC would be able to compete, but said hopefully the situation would not "push out other reasonable [U.S.] competitors."

Security Concerns

Though there was much discussion over Saddam Hussein's alleged attempt to obtain yellow-cake uranium, which is mined but not yet enriched, obtaining it is not usually a cause for security concerns and in many cases is "perfectly legitimate." What is a concern is any attempt to obtain highly enriched uranium, Sokolski said. Stories about sales of weapons-grade material have sparked concern off and on since the end of the Cold War.

Antiproliferation advocates see the spread of enrichment capabilities as a worry because it allows the processing of large quantities of raw uranium into weapons-grade materials. Attention currently focuses on Iran and North Korea, isolated from international fuel supplies due to sanctions over enrichment activities. Iran may have enough uranium domestically to fuel a single reactor but not enough for the ten to twenty they hope to build in the future, experts say. "The idea they are going to sustain anything but a weapons program is ludicrous," Sokolski contends of Iran's uranium supplies. An August 2009 report from the Washington, DC-based Institute for Science and International Security, estimated Iran has enough fuel for two nuclear weapons (PDF) by February 2010.

In December 2009, allegations Kazakhstan might sell more than thirteen hundred tons of purified ore--enough to fuel 150 warheads (RiaNovosti)--to Iran sparked fresh concerns about Iran's nuclear program--though both countries denied the plan's existence. North Korea, which is thought to have detonated a plutonium-based nuclear device in the spring of 2009, has "plenty of natural uranium reserves" to supply a weapons program, but its current uranium enrichment capabilities are unclear, according to a report by the Bulletin of the Atomic Scientists.

Countries such as Brazil and South Africa also plan enrichment programs, but these countries raise less concern. "It comes down to an issue of trust," says CFR Fellow Charles D. Ferguson, who noted in a 2007 Council Special Report that the problem "with this view is that today's good guy can become tomorrow's bad guy and vice versa."

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